Coronavirus in Oklahoma: Are your losses covered by business disruption insurance?

Mar. 20--With many businesses having to shut down or severely limit their operations due to the coronavirus outbreak, many may be looking to their business interruption insurance policies for some relief. So what is "business interruption" insurance?

Business interruption insurance covers losses of revenue occasioned by certain events described in the policy that cause an interruption of business as usual.

Would the COVID-19 pandemic be such an event?

It is unlikely that the pandemic would be a covered event, as business interruption insurance usually will require physical damage to the business premises to trigger coverage. However, under certain policies, government-mandated travel bans, business closures, and restrictions on gatherings could qualify as a covered peril.

What should companies be looking for in their business interruption policy to figure out if their losses are covered?

The first step is to determine the "covered perils." You should look for coverage if your business is closed by the actions of a "civil authority." You will want to see if the policy has what is known as "contingent business interruption" coverage. That coverage provides protection against revenue-related losses by covering lost earnings that are the result of a third-party supplier or distributor shutdown whose interruption directly impacts your business. You also will want to see if it has "supply chain" coverage and what parts of the supply chain are covered. Supply chain coverage often will not require physical damage to the supplier or distributor.

What kinds of losses are covered?

Again, that depends on the policy. The policy may cover lost revenue, rent or lease payments, wages, taxes, and loan payments, among other things.

If a company does not have a business interruption policy, does that mean it is out of luck?

Not necessarily. Companies should review their commercial insurance policy to see if it covers business interruptions.

Where should companies start?

Coverage depends on the terms of the policy. However, sometimes courts have read policy provisions to expand coverage beyond what is obvious from the policy wording. For example, "physical damage" to the business premises includes structural damage. But, structural damage is not always necessary. Contamination of the property has been treated as physical damage. If you have questions, you should consult your insurance agent or your attorney for guidance.

Paula Burkes, Business writer

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